THE VILLAGE BY THE BAY
MARCH 1, 2017
A CRESPOGRAM SPECIAL SERIES
Two other changes that were also made seemed to hold promise of increased revenue to the Village. The first was that there would be a 3% annual increase on the $25,000 Base Rent, and secondly, that there would be a 10% bonus payment on all revenue over $4.5 million.
While on first reading this might seem to represent a better deal, it does not appear from what eventually happened, that anyone either undertook a rigorous evaluation before the changes were agreed to, or cared what happened after the contract amendment was implemented.
I base this claim in part on my public records requests to the Village Manager for, "any and all correspondence between you and Johnny La Ponzina that includes any discussion or rationale that had anything to do with the 2005 Contract Amendment especially the change in the Base and Percentage Payments," as well as a subsequent request for a second request to him for, "...a copy of any staff analysis that was conducted prior to the decision that in the way in which the Village decided to recalculate the Base and Percentage Rent paid by Professional Course Management."
My first request elicited a response that there were "no public records responsive to your request," and I received no response at all to my 2nd request.
So, if there was any kind of professional evaluation, which I seriously doubt, it ended up in a garbage can, or it was so bad that now no one wants to make that information public.
THE PROOF IS IN THE PUDDING, OR SO THE SAYING GOES
To determine whether the decision made by the Village Council to support the deal negotiated beween Tom Benton and Johnny La Ponzina on behalf of PCM was a good deal, one need only look at the financial numbers as the years went by to see that since 2006 this deal turned out TO BE BAD for the Village.
To start with, while the 3% annual increase on the base rent seems reasonable, the increase did not kick in until 2015, which means that for the first 10 years after the terms of this contract extension was approved by the Council, the Village was stuck with a flat $25,000 payment in Base Rent. To really appreciate what $25,000 a year means, that comes out to $2229.17 a month, or $557.29 a week. How many houses in Miami Shores would you suspect are rented for more than that? Yet, that's what the Village got in Base Rent for the Country Club AND the Golf Course!
The second, and even worse part of this deal was that contrary to any expectations that the Council Members might have been led to believe that the changes to the terms of the Additional Rent would result in increased revenue to the Village did not occur.
In fact, just the opposite occurred.
A review of the annual financial records provided to the Village by PCM shows that it took from 2006 - the first full year of the revised contract - to 2016 before the $4.5 million in gross revenue plateau was reached, requiring PCM to pay the Village that 10% bonus payment., and that payment I calculate was $12,498.40.
It' is difficult, if not impossible to determine the accuracy of any financial reports provided the Village by PCM when the accompanying letter from their accountant includes a disclaimer that starts with:
"Management has elected to omit substantially all the
My biggest concern, both as a resident, and as someone trying to make sense of what has been going on with this 27 year relationship between PCM and the Village was in trying to discover whether or not the Village had ever conducted an independent audit of PCM's books - as they were contractually entitled to do - to make sure that we weren't being screwed any more than I had already discovered we were.
Several attempts to get a definite answer to that question, as well as trying to get any documents that would have supported a rationale for the change in the lease payments in 2005 were sent to both the Tom Benton, the Village Manager and Barbara Estep, the City Clerk. Estep's response was that she didn't have copies of any audits in her records, and Benton refused to respond, even just to say, NO.
(You can read a copy of my last letter to Tom Benton asking for this information by going HERE.)
What appears to be a failure, or refusal, by the Village Manager to audit the books of PCM raises serious questions not just about whether the financial numbers provided the Village accurately reflect the percentage rental payments made to the Village, but it also says a lot about engaging in best practices and the willingness of the Village Manager to look out for, and protect the interests on the residents.
It's a question that cannot be ignored, and one that the new members of the Village Council will have to address.
As to Benton's refusal to respond to my questions or provide me with the documents I requested - if they exist - it is true that a public official is not required by law to answer questions submitted to them, but it has been my experience, based on many years of doing what I do, that by and large the public officials who refuse to respond to questions or provide documents are ones who have something to hide.
I suspect that we'll be addressing that issue a lot in the future, and maybe even taking this issue before a Circuit Court Judge at some point, but for now there is another issue that Benton has refused to respond to that should interest you.
THE PREMIER GOLF CARD
Johnny LaPonzina, the President of Professional Course Management is an enterprising guy. In addition to the lease with the Village, he also has a management agreement with the City of Miami Beach to manage the Normandy Shores and Miami Beach Golf Clubs, and he also manages the Pembroke Lakes Golf Club. None of his deals with these other local governments is as sweet as the one he has with Miami Shores.
In addition to managing these public golf courses, he's also the founder and president of the Premier Golf Card, a company that he founded in 1991.
I cannot speak about the history or early success of this company, but in July 2012, in a memorandum prepared by the City of Miami Beach titled: DISCUSSION OF THE CURRENT MANAGEMENT AND OPERATIONS OF THE CITY OF MIAMI BEACH GOLF COURSES, CLUBHOUSES AND RELATED FACILITIES AND OPTIONS/DIRECTION FOR THE FUTURE MANAGEMENT AGREEMENT, there appeared the following revelations about the arrangement that La Ponzina had negotiated with the City of Miami Beach, and the financial benefits that the city had received. (See page 13.)
A review of PCM's financial reports provided to the Village shows that in 4 of the first 6 years of the revised contract, the gross revenues did not reach the $3.6 million minimum range required to trigger the payment of any Additional Rent, which means in those years the Village only received the $25,000 base rent, and in only one year - 2016 - did they exceed the $4.5 million, activating the payment of the 10% override.
Here is a year to year breakdown, and the copies of the financial statements provided by PCM to the Village can be found HERE.
YEAR GROSS REVENUE PAYMENT TO VILLAGE
2006 $3,565.839 -0-
2007 $3,768.014 $75,000
2008 $3,730.616 $75,000
2009 $3,175,396 -0-
2010 $3,117,927 -0-
2011 $2,840,252 -0-
2012 $3,623,945 $50,000
2013 $3,975.219 $125,000
2014 $4,047,013 $150.000
2015 $4,241,041 $150,000 + $750/3% increase
2016 $4,624,984 $150,000 + $772/3% increase
plus 10% bonus $12,498.40
What this means is that the total amount of rent paid to the Village, including the $25,000 in annual Base Rent for the years 2006 - 2016, and including the 3% increase in Base Rent that kicked in in 2015, along with the 10% Bonus that also occurred in 2016 came to $1,064,020.40.
If, on the other hand, the Village had stayed with their original deal of receiving an annual Base Rent of $150,000 a year - and even excluding any 8% override on income generated by golf revenue - those payments would have totaled $1,650,000.00.
In short, the difference between these two amounts to date represents a NET LOSS to the Village of a minimum of $585,980.60.
So, 27 years after the Village decided to lease the management of the property to PCM, we are receiving considerably less money, adjusted for inflation, than we received in 1990.
In order to achieve the value of the original $150,000 payment to the Village in today's dollars would require an annual base rental payment of $287,212.12.
PART I - WHAT WE HAVE HERE IS A SERIOUS FAILURE OF OVERSIGHT
The financial records I've used in this story are documents provided to me by the Village as part of several public record requests, and while I have to accept them at face value, there is no assurance that these financial records are accurate or reflect the real income generated by Professional Course Management in its operation of the Miami Shores Golf Course and County Club.
But even before we get to that problem, there is the problem of whether or not the Village Manager was aware of the financial numbers I cited above, and whether he's reported any of this information to the Village Council in recent years, given that the lost revenue affects the Village Budget?
It's pretty evident, even from my cursory review of records and videos of Council Meetings that the members of the Village Council are more or less treated as the proverbial mushrooms that are kept in the dark, fed shit, and ignored except when it comes time to clean them up and eat them.
The lack of independent staff and support for the members of the Council all but guarantees that for the most part they will become pliant and dependent on whatever information they are provided by the Manager or the Village Attorney - who, and this is my personal opinion, I would describe as the Grave Digger, because it's clear that after all the years that Richard Sarafan has had his sweetheart deal as a part-time Village Attorney on a retainer, his main responsibility besides billing the Village by the hour, is not only burying the bodies, but keeping track of where he buried them and being Tom Benton's mouthpiece.
This is a serious problem, because as I pointed out in my first story about the behavior of the Village Council, when you have a situation where Council members, for whatever reason, do not want to let the residents speak on the first reading of Ordinances, and when Resolutions are routinely shielded from discussion by making them part of the Consent Agenda, then the possibility of screwy deals that turn out not being in the best interests of the Village or the residents are bound to occur.
PART II - WHAT WE HAVE HERE IS A SERIOUS FAILURE OF OVERSIGHT
For me, when it comes to writing stories involving public money, more information is always better then less, and best practices always supports the argument that if a governmental agency is depending on financial payments from an outside vendor or contractee, then a periodic review of the books should not only be considered, it should be mandatory.
As President Ronald Reagan once famously said, "Trust, but verify."
While I am far from being a financial wizard, I have over the years had an opportunity to review numerous budgets of both cities and public agencies, and also the certified audits done on those budgets and financial reports, and I have never seen cover letters from accounting firms like the ones attached to the reports that PCM provided to the Village.
Here is the one from 2016, and you can see all of the letters from 2006 to 2016 by clicking HERE to the financial reports.
What passes for accepted truth by a sizable number of Miami Shores residents is that back in the day - the 1980's to be exact - the Village was doing such a bad job of managing the country club and golf course that the property became run down, and people started staying away in droves.
To deal with the problem, the Village Council decided to lease the property to Professional Course Management (PCM), a golf course management company, and over the years the company did a more than adequate job of improving the facility, making it one of the better municipal golf course in South Florida.
While there was praise from residents and visitors who frequented the country club and played golf, there were others in the Village who claimed that the incompetent and scheming members of the Village Council did a terrible deal by giving away the management of the country club and golf course to PCM for a measly yearly base rental payment of $25,000.
In fact, the claims of a $25,000 base rent negotiated as part of the 1990 contract were false.
A review of the lease contract and the 6 contract amendments that have been made to it since 1990 shows that the original deal called for a base rental payment of $150,000, with an 8% percentage payment on any "golf revenues," that went above the $150,000 base rent. For it's time this was not a completely unreasonable or bad deal.
Here is the portion of the original contract that spells all that out. (The complete contract and the 6 amendments can be read HERE.)
The original contract with PCM gave them a 10 year lease with 3 - 5 year lease extensions.
In 2005, following the completion of the original 10 year lease and the first of the three 5 year lease extensions, PCM chose to exercise their 2nd lease extension, and as part of this process Village Manager Tom Benton renegotiated the payment terms in the contract.
Here is the portion of the March 15, 2005, Council minutes where it describes what was discussed about the new agreement. The Council members at the time were Jim McCoy, Herta Holly, Al Davis, Ed Quinon and Greg Ulman.
All of the public golf courses that La Pozina manages participated as partners with The Premier Card, and if you go on the Miami Shores Country Club website you'll see the card promoted, although the number of courses has dropped from the 26 that were participating in 2011, to 14 today.
Since this was such a good deal for the City of Miami Beach, generating as they claimed, $3,404,822.91 in the 3 years from 2009 - 2011, you have to wonder why Tom Benton didn't see this as a good deal for the Village and include it as part of the negotiations that he had with PCM in 2011, when the contract was opened up and renegotiated for the 6th time.
Getting a piece of that Primer Card money seems like a no brainer for anyone supposedly responsible for making sure that the Village got it's fair share from its only real income generating property. It certainly was a no brainer for the City Manager of Miami Beach.
The reason that the contract was opened once again for renegotiation was that PCM wanted to replace the Greens on the golf course, and they wanted something from the Village Council to do it.
Council Members who were present at the October 19, 2010 meeting when this item was presented were, Al Davis, Prospero Herrera, Hunt Davis, Herta Holly and Steve Lofferdo.
Now, I can imagine that Benton's response - besides claiming that he was only doing what the Council approved - might be that it was PCM who asked that the contract be amended, and therefore only their issues were on the table, and this is speculation, because he's refused to either provide me with the documents I requested, or answered any of my questions.
That argument however, would never preclude the Village from using that opportunity to look out for it's own interests, and introduce it's own changes to the contract, especially since by then it had to be evident that the rental payments agreed to by several of these same Council Members in 2005 weren't generating anywhere the amount of money that they were obviously led to believe would be coming to the Village.
It's actually a pretty clear-cut case of gross mismanagement on the part of Tom Benton to ignore a possibility to improve the terms of the contract in a way that would benefit the Village, when it was so evident by 2011 that the Village was loosing money on his 2005 contract renegotiation.
In fact, this 6th amendment to the contract raises another question about who's interests Tom Benton was looking out for in 2005 and 2011.
As I said, the contract was renegotiated in 2011 because PCM made a decision that the greens on the golf course needed to be restored. Now, under the terms of the original contract this was the kind of capital improvement that PCM was responsible for doing - and paying for - as part of the lease agreement.
In the portion of Amendment 6 below, you see that it states in clear, unequivocal language that:
"All of the work constituting the 2010 Greens restoration
shall be performed at tenant's sole cost and expense...None
of the costs of the 2010 Greens Restoration shall be counted
toward satisfaction of any of the Tenant's Annual Expenditure
Obligations under any other portion of this paragraph 7.03"
Yet, in what can only be considered a sweetheart, reach around deal, the Council Members agreed to give PCM, 2 - 5 year contract extensions, as a reward for their restoration of the Greens.
Did anyone do a cost analysis to determine what the costs for restoring the Greens would be, versus how much money PCM stood to make as a result of these 2 - 5 year extensions, and whether it was a good deal to give PCM what amounted to a 10 year extension on their contract without any sort of renegotiation on the rent payments?
Why not just 1 - 5 year lease extension, or better yet, why any contract extension at all?
The contract extensions of 2005 and 2011, provide a disturbing window into how business has been done in the Village for far too long, and also opens a window into what at best can only be described as either gross mismanagement or incompetence on the part of Tom Benton.
As I previously stated, it's my experience that public officials who act in the public's interest and have nothing to hide, will go out of their way to provide public records and answer questions about the decisions they make, and how they reached those decisions.
Tom Benton has long had a history of refusing to answer tough questions - his performance at the recent Community Meeting over the new Community Center supports that - and I suspect that my arrival on the scene is the first time he's ever been confronted with someone who uses the public records law like I do to seriously go after public records as a way to discover whether public officials have been screwing the public.
To date, Benton has refused to answer any of my questions, nor has he provided me with copies of any documents, studies or evaluations that would justify the renegotiated rent payments and/or whether the Village in the last 27 years, and especially in the years since 2005, ever conducted a professional audit of PCM's books.
To date, and after 27 years, the Village should be making more in rental payments from a lease of the country club and golf course, and instead is actually making far less.
Let this sink in: The Village HAS LOST A MINIMUM OF $585, 980.60 in rent payments from PCM as a result of the 2005 renegotiated contract, and it seems that no one, especially the residents of the Village, until they read this story ever knew that this happened.
If someone inside Village Hall did know, and I would find it hard to believe that no one knew of this problem, they kept it a secret, this is just as bad as having lost the money.
That $585,980.60 could have gone to pay for a couple more cops, or reduce the annual deficit on the operation of the Community Pool, or any of a number of other expenses that we are paying for with our tax dollars.
The Village of Miami Shores has been managed badly for a while now, and the evidence provided in this story is but a small part of a larger series of issues that involve community safety and the future of the Village, including the latest efforts to push the $20 million dollars funding of a new Community Center through a bond issue that need to be looked at with clarity and with a decision to change the way the Village is being managed.
I believe, and I believe that my opinion is shared by many other residents that more important issues need addressing and funding including improving the quality of policing, the building of a new Police Station, and perhaps a new City Hall as well as dealing with sea level rise and even unforseen problems that have not yet surfaced.
There's always an argument to be made for institutional memory, but even at this early stage of my investigations there's also an argument to be made that if institutional memory is a shield for institutional chicanery, then it's time to clean house.
# # # #
WHAT THE LEASE AGREEMENTS BETWEEN THE VILLAGE AND PROFESSIONAL COURSE MANAGEMENT SAYS ABOUT HOW THE VILLAGE HAS BEEN CONDUCTING BUSINESS OVER THE YEARS, AND WHY THE RESIDENTS NEED TO START DEMANDING THAT THE PEOPLE THEY ELECT TO THE COUNCIL NEED TO REPLACE THE VILLAGE MANAGER AND VILLAGE ATTORNEY
The terms of the agreement that the Village Attorney supposedly described to the Council reduced the Base Rent from $150,000 a year to $25,000, and the 8% Percentage Rent on golf revenues over the $150,000 base rent was eliminated.
As an aside, I cannot allow this opportunity to go by without commenting on what appears to be a pattern of behavior that has the part Village Attorney assuming the role of City Manager when it comes to discussing issues before the Council. I'm sure I'll probably be addressing this situation more as the weeks go by, but I wanted to put a marker down now.
In place of the 8% percentage rent, a sliding percentage payment schedule was introduced that added the sale of "food, beverages, equipment, clothing, sundry items" as well as sales from vending machines, concessions, etc., and also included changing the terms of payment from "Net Proceeds" to "Gross Revenue."
The Percentage Payments were structured around Revenue Ranges, as can be seen below.
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